AMD Advancing AI 2024 Event Preview: Can it take market share from Nvidia?

Advanced Micro Devices (AMD) is gearing up for its highly anticipated Advancing AI event on October 10, 2024, in San Francisco. The event is expected to focus on AMD’s latest technological innovations, including the official launch of its data center CPU (Turin), data center accelerators (MI325X), and AI PCs, potentially the Strix PRO. Investors and analysts are closely watching this event as a critical moment for AMD to showcase its advancements in AI hardware and to outline a strategy for capturing more market share in a space dominated by Nvidia (NVDA). AMD's performance during last year's AI event, which saw its stock surge by 10% on the day and 26% over the following month, has set high expectations for another potential rally.

One of the central themes of this year's event will be AMD's effort to position itself as a competitive alternative to Nvidia in the AI accelerator market. Analysts are skeptical of AMD's ability to substantially impact this space, given Nvidia's overwhelming market share of over 80% and its established presence as the leader in AI GPUs and ASICs. However, AMD’s Instinct MI300 series has shown promise, and if AMD can present a compelling roadmap with measurable performance stats, new customers, and clarity on its 2025 AI strategy, investor sentiment could begin to shift in its favor.

AMD's market share in AI accelerators is currently estimated to be between 5% and 7%, far below Nvidia's dominant position. Nevertheless, AMD has ambitious goals to grow its AI-related revenues from $4.8 billion in 2024 to $8.5 billion in 2025, with potential upside to $10 billion if all goes well. Achieving these targets would increase AI's contribution to AMD's total revenue from 19% in 2024 to potentially 32% in 2025. This growth trajectory could position AMD to close the gap with Nvidia, and even outperform companies like Broadcom (AVGO), which also has a strong foothold in AI but a smaller share of its revenue from AI sales.

Last year’s event provided a significant boost to AMD’s stock, as the introduction of the Instinct MI300 series and a broader AI strategy led to a 19% gain in the stock's value over the next three months. At that time, AMD's shares had already gained over 80% throughout the year. This historical context shows that AMD's AI announcements can be a powerful catalyst for stock performance, especially if the company can continue to build on the momentum of its AI initiatives. Investors will be watching closely to see if AMD can replicate or even exceed last year's positive market reaction.

Going into this year’s event, shares of AMD have been trading cautiously, up about 15% year-to-date compared to Nvidia's massive 155% rally and the PHLX Semiconductor Index's (SOX) 24% increase. This relative underperformance highlights the market’s skepticism toward AMD's ability to compete effectively against Nvidia in the AI space. However, a strong presentation this Thursday could shift market dynamics, with AMD potentially closing the performance gap with Nvidia and gaining ground in the AI accelerator market.

One area that could significantly impact investor sentiment is AMD's announcements regarding partnerships with major tech companies. There is speculation that high-profile customers like Amazon (AMZN), Alphabet (GOOG), and Meta (META) may make appearances at the event to discuss their use of AMD’s AI technology. Confirming these partnerships and highlighting design wins in AI inference would provide a major boost to AMD's credibility and competitive positioning in the market, particularly against Nvidia, which has long dominated this sector.

Despite the challenges, AMD's competitive edge lies in its pricing strategy and open-source software framework, ROCm, which could attract projects that require flexibility compared to Nvidia’s proprietary CUDA software. Analysts believe that if AMD can show a path to capturing 10% of the AI market share by 2026, it would significantly enhance its revenue, potentially adding $5 billion in sales, and push its stock price to new highs. Such a move would mark a critical step for AMD in breaking Nvidia's stranglehold on the AI accelerator market.

In conclusion, the upcoming Advancing AI event could be a defining moment for AMD as it looks to solidify its position in the AI market. The stakes are high, and the event represents a chance for AMD to demonstrate its capability to compete with Nvidia's dominance and expand its market share. If AMD can deliver a robust presentation with clear metrics, high-profile customer endorsements, and a strategic roadmap for AI growth, it could be the catalyst needed to propel its stock higher and reshape the competitive landscape in the AI accelerator space. Investors will be watching closely to see if AMD can turn its technological advancements into tangible gains in market share and revenue.